- The Washington Times - Friday, May 25, 2001

With household incomes on the rise and sticker prices stalling, cars and trucks are at their most affordable level in 22 years.

It now takes just 22.7 weeks of median family income before taxes to buy the average car, down from a peak of 30 weeks in 1992, according to statistics from Detroit-based Comerica Bank. In 1979, it took 22.6 weeks of income to buy a car.

"Things are so cheap, people are buying," Chrysler Group Chief Executive Dieter Zetsche said.

The favorable pricing stems from intensified global competition and a glut of new cars, minivans and trucks worldwide, the Detroit News reported earlier this week.

Asian and European carmakers are using a barrage of new products and favorable currency rates to apply tremendous pressure on Detroit's auto companies, who are battling back for market share by offering deep discounts and low-cost financing.

The high-stakes turf war has placed consumers such as Judith Jones firmly in the driver's seat.

The 58-year-old college professor from Norwalk, Conn., was originally laughed out of a Toyota dealership when she offered $25,000 for a Camry with leather seats, a six-disc CD changer and a sticker price approaching $30,000.

Undaunted, Miss Jones used CarsDirect.com to scour the Internet and finally found a dealer willing to meet her rock-bottom price.

"I figure I saved close to $5,000," Miss Jones said. "It feels marvelous."

The wealthiest 20 percent of the U.S. population buys 80 percent of all new vehicles, which sell for an average of $22,000. The average transaction price has stayed flat for the last few years even as manufacturers have added more features.

While flat prices are good news for new-car buyers, the deflationary pressures that have kept prices from climbing has been devastating to Detroit's automakers.

The toll of incentives was brutally clear when Ford, General Motors Corp. and DaimlerChrysler reported dramatically lower first-quarter earnings this year.

"It's certainly a buyer's market but this is also a serious problem for the Detroit automakers," said Rod Lache, an analyst with Deutsche Bank.

Since World War II, automakers could be counted on to raise prices by 2 to 3 percent, sometimes more, at the beginning of each model year, followed by occasional midyear price increases. But in recent years, the automakers have been holding the line on prices.

This is especially true of Detroit's automakers, as they fight to hold on to an eroding U.S. market.

"This idea that you roll out on one day with price increases is over," said Rick Wagoner, GM's president and chief executive. "Throughout the year, we look for opportunities where we can raise prices. If there's somewhere we can raise prices, we do. What has happened far more often over the past five or six years is we end up one way or another reducing that price."


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